The festive period is over and reality is sinking in. Back to work, and worrying about the money we spent on gifts, food and going out over the break. For many, money worries are a constant and not just seasonal and some take drastic methods to fix them. In desperation, people can find themselves reaching out to loansharks and money lending services with ridiculous interest rates, which just drag them further into the abyss of debt. This of course is not a problem in Africa alone, with many all over the world feeling pressure to take out a pay day loan, but the lack of regulation in parts of Africa can put people into dangerous situations.
There is currently a race to corner the loan market in Africa. With more and more people having access to the internet and mobile phones, it is now possible for them to gain access to credit. The informal work force finds it challenging to gain access to credit. Many of them do not have bank accounts, and therefore it is difficult to get a credit rating. But this is changing, with firms like LendingSquare offering innovative methods of creating credit scores, using criteria and data taken from their internet usage as well as their mobile money expenditure. This is a starting point for providing small safe (ish) loans for small businesses.
This movement in the credit sector has pushed TransUnion, who have been based in the USA for over 50 years, to take the plunge and head down to use their expertise in the African market. They have set up a credit rating service in Kenya and Rwanda, to enable individuals to find out their credit rating via text message. They feel by making more Kenyans and Rwandans active in the economy, it will take dangerous loan sharks out of the equation. With a credit score available, people will be able to access loans from reputable firms, and under safe circumstances, to develop their businesses and households.
With the popularity of mobile money, and online loans, e-banking, and even the usage of ATM machines, financial security protocol is very important. Governments need to keep continuously review security policies to keep up with changing technology, and individuals need to take measures to make sure their financial data is safe, and they do not send money to fraudsters by mistake. But sometimes it simply isn’t as easy as that, and with the greatest of intentions, people still end up being defrauded.
Another firm that has decided to move into Africa, in this case to help combat financial fraud in Nigeria, is Comodo, also based in the USA. They have entered the market via Tros Technologies. They aim to help businesses secure their data by offering them their “secure box”. It protects against viruses as well as firewalls and other hacker attacks. With the rise in ransom ware attacks, in which hackers encrypt and hold your data at ransom, such systems are vital to gain confidence in online Fintech in Africa.
Worldwide companies are coming online and digitising. It is so important, because traditional methods of marketing are becoming outdated, and customers can be targeted specifically on social media, google, youtube or other online outlets. There is still an uncertainty in Africa from both businesses and consumers. Online payments are still not the norm in a cash society, even with mobile money gaining popularity. But with systems in place to protect consumers and businesses, confidence will increase, and efficiencies will improve. If this is accompanied with education on online security, both financial and personal security, it will ensure the safety of individuals online. (Knowledge on personal online security in Africa is lacking and requires a big boost)
This year, more people in Africa will be managing their finances digitally. I hope that there are innovations that pop up across the continent, like that of LendingSquare that can compete with those that are coming down to take advantage of the African market from outside. Tech hubs across the continent should continue to look at Fintech and all the possibilities surrounding it. Cryptocurrency integration, loans, banking, insurance, pensions, investments all have room for growth in the African market, and African entrepreneurs should create solutions.
If you know of any innovations in Africa, an innovation that is changing lives, or you also want to be a guest blogger, get in contact with us on Twitter @inventiveAfrica or via email. Please share the blog with your network on Twitter and Facebook.